Week Ending December 11, 2020

FERC Staff Face Heat at House Subcommittee Hearing on Landowner Rights

This Article Appears as Published in Foster Report No 3328
FERC Staff Face Heat at House Subcommittee Hearing on Landowner Rights

FERC is not doing enough to protect the rights of landowners caught up in natural gas pipeline reviews and should make some changes to balance the scales that currently favor pipeline companies, members of a House of Representatives subcommittee told FERC staff December 9.

“FERC’s credibility is at a low point right now,” said Rep. Stephen Lynch (D-Mass.), a member of the House Oversight and Reform Committee who spoke at the hearing held by the Subcommittee on Civil Rights and Civil Liberties. Lynch, who raised concerns about two pipeline projects being built in Massachusetts, was among the Democrats who posed tough questions of FERC staff about the pipeline review process, the rights of landowners, use of eminent domain and what happens when pipelines are cancelled.

Following a pair of pipelines being canceled this year, the topic of landowner rights and restoration of land is cropping up, along with FERC’s obligation when a certificate authorized under the Natural Gas Act (NGA) is not used. Unless FERC takes a more robust view of project need on the front end while it is reviewing pipeline applications, there may be some more projects canceled if they become economic, Carolyn Elefant, an attorney who represents landowners, said after the hearing.

Addressing a question that came up during the hearing, Elefant said FERC has the ability to impose conditions on pipeline approvals, such as returning property to landowners for cancelled projects, requiring a company to restore properties for cancelled projects or compensating landowners to do it. She does not believe FERC can limit an approved pipeline’s eminent domain powers, since that comes from Congress through the NGA,

“However, what FERC can do is expressly say that a certificate is an incipient authorization and is not effective until all permits are received. If the certificate isn’t effective, eminent domain couldn’t attach,” Elefant said in response to questions from The Foster Report.

The canceled projects that came up during the hearing involved Constitution Pipeline and Atlantic Coast Pipeline, both of which had some construction take place and eminent domain authority used before project owners declined to complete them. In the case of ACP, some landowners pocketed millions of dollars for a pipeline that will not be built, while others racked up exorbitant legal fees fighting it, and the FERC process that they state puts landowners at a disadvantage.

During the hearing, House members also pressed FERC on the lack of initiative in following a congressional mandate for an office of public participation at the Commission. While FERC witnesses said funds have not been appropriated by Congress for that purpose, lawmakers asserted that FERC has never sought such funding to meet that directive.

The subcommittee, chaired by Rep. Jamie Raskin (D-Md.), is the same one that began an investigation of FERC’s gas pipeline approval process and treatment of landowners earlier this year. That investigation is continuing, with a November 20 letter to FERC Chairman James Danly seeking answers to multiple questions about restoring pipeline rights-of-way following construction, authorizing service to begin before restoration is complete – such as in the case of Midship Pipeline in Oklahoma — granting more time to build facilities, disposition of property for cancelled projects, any recourse for landowners at FERC if their land was not restored properly and if any civil penalties or enforcement action has been taken against pipelines for not restoring land in a timely manner.

Landowner rights are being trampled and it is time for FERC to restore some fairness in the process, Raskin said in an opening statement. He and other Democrats said property rights are a bipartisan principle and the landowners who are losing out in the FERC process include Republicans, Democrats and Americans of all types.

Republicans on the subcommittee generally spoke in favor of pipelines as the safest and most efficient method for transporting natural gas, the emissions reductions allowed through enhanced gas use to displace coal-fired generation and LNG exports to benefit the U.S. economically and in global trade relations.

Rep. Chip Roy (R-Texas), ranking member on the subcommittee, noted that he understands the concerns of landowners after dealing with eminent domain proceedings and an intrastate pipeline approved by the Texas Railroad Commission. He cited data from the Interstate Natural Gas Association of America that eminent domain is used as a last resort, on less than 2% of pipeline tracts.

Roy referred to efforts of Democrats to halt pipelines and oil and gas development, but he agreed that landowner rights should be protected, whether the infrastructure involves highways, pipelines or other facilities. He sought to ensure the public has the ability to take part fairly in the FERC review process and that there are safeguards for landowners to receive adequate compensation. “I want to know that property rights are being respected,” Roy said.

Facing the lawmaker inquiries, which often involved more statements than questions, were FERC Acting General Counsel David Morenoff and Terry Turpin, director of the Office of Energy Projects at the Commission. They frequently referred to recent changes made at FERC, including an updated website with clear instructions for landowners to become involved in a pipeline proceeding, the Commission’s decision to not allow construction to begin while rehearing requests are pending, a revised rehearing process within the Office of General Counsel to prioritize landowner requests and other steps.

There are many protections built into the FERC process for effective public participation in pipeline cases, though compensation and eminent domain are issues handled by the courts and other parties, Morenoff said. He and Turpin noted that the prefiling process puts pipeline developers in contact with communities along a proposed route, with changes made to projects before an application is filed at FERC.

Morenoff said several years ago, public participation in the FERC process was challenging and criticism could be warranted. But steps taken recently have improved the process, on top of the phone hotline to handle questions and a notice of inquiry (NOI) on FERC’s certificate policy statement, which has been pending due to a lack of full complement of commissioners, he said.

A revised policy statement may not make that much difference if the Commission does not alter the way it determines the need for pipelines, Elefant said. Parties that filed comments on the NOI argued that precedent agreements should not be the sole basis for determining need, while others asserted that precedent agreements represent a binding financial commitment and other methods could devolve into dueling studies, with no clear outcome. The best way to get at a project’s need is to have a hearing before an administrative law judge, “where opponents can get discovery of company documents and where company officials are deposed,” Elefant asserted.

When Raskin referred to the 99% approval rate for FERC on natural gas pipeline applications under the NGA, Turpin responded that through prefiling and other meetings, only those projects that are well planned and prepared are the subject of applications filed at FERC.

The title of the hearing when it was announced earlier this week, “Pipelines Over People: How FERC Tramples Landowner Rights in Natural Gas Projects,” provided a preview of what Turpin and Morenoff would be facing from the subcommittee.

Rep Carolyn Maloney (D-N.Y.), who chairs the full committee, noted that when the U.S. Court of Appeals for the D.C. Circuit limited FERC’s use of tolling orders on requests for rehearing, then-Chairman Neil Chatterjee and Commissioner Richard Glick issued a joint statement that Congress should amend the NGA to provide more time to act on rehearing requests. Morenoff noted that legislation in the House to do just that appears to strike a reasonable balance for timely responses – 60 to 90 days for rehearing requests under the NGA and 120 days for rehearing requests under the Federal Power Act.

But FERC could suspend a certificate under the NGA on its own while a rehearing request is pending, without action by Congress needed, Maloney suggested. Morenoff answered that the Commission could issue some type of stay of an NGA certificate, but it has previously held that eminent domain authority goes to the certificate holder once an order is issued, and it is striving to figure out the best way to ensure FERC actions stay within the statutory authority.

Raskin and other lawmakers brought up questions around Constitution Pipeline and ACP, both of which were awarded certificates by FERC and went through eminent domain proceedings in court, only to be scrapped by owners for different reasons.

In court documents and interviews earlier this year, officials with Constitution and landowners related how project owners are returning land and providing compensation to landowners, though trees were cut and other actions taken that devalued land, including more than 500 trees owned by the Holleran family and their maple syrup business in Susquehanna County, Pennsylvania. A settlement filed with the U.S. District Court for the Middle District of Pennsylvania includes a nondisclosure agreement that limits information, apart from the compensation and returning the land to the Hollerans.

Rep. Debbie Wasserman Schulz (D-Fla.) said FERC allowed the tree felling as preconstruction activity, when Constitution still had state permits that needed to be obtained and the loss of the trees destroyed the Holleran family’s business. That was not an outcome that FERC wanted or anticipated, and it has changed the process so that tree felling cannot begin until all permits are obtained, Morenoff and Turpin said. The Constitution case, where the owners canceled the project earlier this year, was the first time FERC authorized activities and other permits were not obtained, Turpin said. The Commission no longer issues notices to proceed with construction if a company does not have all permits for a section of a project, Turpin said.

Elefant, who represented the Holleran family, said they secured the settlement for damages and replanted 200 trees themselves. Other Pennsylvania landowners where Constitution was being developed — construction did not take place in New York — provided easements and did not contest the taking of land, she noted.

Constitution was canceled after many years of failing to gain approval from New York for a permit under the Clean Water Act. When a state denies a permit, pipeline companies will be more hesitant about moving forward with a project, Elefant said after the hearing. “I think companies will also start applying for state authorizations earlier in the process to avoid delays, and submit more robust applications,” she said.

Addressing questions from Raskin on Constitution, ACP and the use of eminent domain, Turpin and Morenoff said FERC has the authority to direct companies to restore land to the conditions included in the pipeline approval orders. Raskin commended FERC for asking about damage involving landowners in the ACP case, then he asked whether FERC could simply include a condition in an NGA certificate approval order that requires land to be returned if a project is canceled. Eminent domain provides a perpetual easement that hinders land value, and including a condition to return land if it is not used for a pipeline seems sensible, Raskin said.

FERC has not included such conditions and it views eminent domain proceedings beyond its authority, Morenoff said. “I think it’s an open question” on if such wording or conditions could be imposed in an order, he told Raskin. FERC’s authority to impose conditions is not boundless, and it has not been tested as suggested by Raskin to date, Morenoff said.

In a statement following the haring, Raskin said the FERC witnesses admitted that the Commission does not use its authority to protect landowners. “FERC does not condition its pipeline approval on a requirement that the company return unused land to its owners when a construction project is cancelled,” Raskin said.

“A system where corporations win nearly 100% of the time and people win 0% of the time is not a fair, unbiased, and balanced system. It is rigged. That is not a system of justice or of administrative process that anyone can recognize for a democratic society,” Raskin said.

By Tom Tiernan ttiernan@fosterreport.com

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